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Commercial Property

BIS Oxford Economics has been forecasting movements in Australian commercial property markets since 1988. Our reports on the office, retail, large format retail, hotels and industrial sectors focus on future market trends and what they mean for our clients.

The Sydney industrial market’s recent run of strength continues. Demand for space remains solid, underpinned by a strong NSW economy and continuing structural change in the retail industry. Industrial construction is rising to the task, supplying new, technically advanced premises to the logistics sector, while also building ahead of demand.

Meanwhile, rental growth has been notably weak in most parts of the market for several years. The ample supply of land for development, strong competition for pre-leases and speculative construction are keeping a lid on rents.

Industrial property remains popular with investors. Fanned by the low interest rates of the past few years and the accompanying search for yield, weight of money ensures that investment yields are still firming and prices are still rising. In the prime market, both have now exceeded their pre-GFC peaks, leading many investors to focus their attention on the secondary market.

However, signs are emerging of potential change. The very low interest rates of the past two years were unsustainable in the long term and would have to go up eventually. It was just a question of time. In November 2016, we saw a first step-up following the US elections, and signs are emerging that investors are starting to switch focus from yield to growth assets.

This raises important questions: What is the outlook for Australian interest rates? What, if any, impact will this have on industrial property? What can be done to prepare for potential impacts?

The study is relevant to a wide range of industry participants, providing a valuable tool for developers, land owners, construction companies, investors, fund managers, lenders, policy makers at all levels of government, as well as public sector corporations